Since DAI is currently being destroyed (lemmy.sdf.org)

submitted 5 months ago by BD89@lemmy.sdf.org to c/monero@monero.town

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Does anyone know an unfreezable stablecoin that is the least at risk of becomming another TerraLuna? I love Monero but its too volatile to keep 100% of my life savings in an unfreezable stablecoin is CRUCIAL. This is such horrible news. Fuck Rune Christiansen for this shit!!

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[-] mister_monster@monero.town 5 points 5 months ago* (last edited 5 months ago)

It really is a shame what's happening with dai, isn't it. They're trying to cut out the decentralized thing from MakerDAO without alienating the community by creating another thing with the decentralized characteristics that they will design to fail. It's such a terrible thing happening.

Thankfully, the makerDAO multicollateral contracts are available, anyone can launch a clone of DAI that functions as is. And they can even prevent things like USDC collateral (the only time they've ever broken peg was due to USDC losing it's peg, DAI is very well designed and IMO can handle decentralized collateral volatility) and keep it strictly ETH or whatever. Also, am interesting thing, the oracle can be trivially modified to provide a price of another asset, so you can synthetically create gold backed stables that hold no real gold if you like, or even more interesting, you can peg to things even more stable than gold and that track inflation, like salt, or peg to non asset measures like CPI if you like. You just have to remember that this is potentially manipulatable by participants in those measures, just like the value of DAI is subject to Fed policy. Personally, I'd rather have my stable pegged to a commodity like salt than to a fiat currency.

If you like the idea of gold, there's PAXG, I don't know if it's freezable, I would be surprised if it isn't, but I highly doubt these other stables are going to start freezing out small fish just to demand KYC.

Anyway, this is all off topic for Monero but it's still something I figured is worth discussing. On a Monero related topic, o wonder what the serai developers are going to do in response to this, their entire goal is a dex that supports DAI, ETH, BTC and XMR from launch as basic functionality.

Edit: apparently, there's liquity and lusd, which is governance free, unfreezable, pegged to USD via ETH collateral (unlike Luna which existed to collateralize TUSD, an obvious fail to anyone who even marginally understands this stuff) and has what I think is a pretty solid peg mechanism from my perusal of documentation. I'll have to look at details and think on it, my main concerns are that the collateralization ratio is hard coded into the contracts at 110% (no governance, remember) and that the base fee for creating LUSD is hard coded to stay between 0.5% and 5%, which may not be sufficient in wild swings in the value of ETH. The contracts are not upgradeable, again, no governance. That's good but also scary. All in all, if I were going to park some capital in a USD pegged stable some time over the next year or two, I wouldn't use it, I want to see how it performs in a bear first, and DAI is going to work as is for the next couple of years anyway so it works fine for now.

[-] gunnm@monero.town 3 points 5 months ago

Tether also has gold backed XAUt token. I believe with the big narrative of RWA we will see more stables.

[-] WishfulAlbatross@monero.town 1 points 5 months ago

What does RWA solve? It has no real connection to the blockchain besides a promise from a centralized entity that it is backed. Almost no difference to digital fiat unless it is unfreezable?

[-] mister_monster@monero.town 1 points 5 months ago

I was looking into xaut and from what I understand you have to KYC to get it and they freeze it.

[-] chaser@monero.town 3 points 5 months ago* (last edited 5 months ago)

as someone who has studied both, I would recommend LUSD (v1) over dai. LUSD was launched 3 years ago, so it stood the bear test. the minimum collateralization ratio of 110% applies to individual troves as long as the total system collateralization is over 150%. once that's breached, troves are required to have 150% minimum. the Achilles heel is the oracle. if Chainlink pulls the rug, which they can, it's over (sadly, Tellor is used by Liquity in a way that it can't protect against a Chainlink apocalypse). Maker is somewhat better in this because they use Chronicle, which is ran by more trustworthy people, but I'm almost sure they haven't made their contracts immutable. if that is the case, then the same attack vector exists there.

as you'll see, neither of these are the solution we're looking for, and they both run on the no-privacy, hypercomplex, captured, constantly changing Ethereum blockchain, so... fuck.

but dai for a long time has not been what the market thinks it is. avoid it.

[-] mister_monster@monero.town 2 points 5 months ago* (last edited 5 months ago)

Interesting, I had learned about the recovery mode of Liquity and knew about the 150% system wide collateralization threshold, also the redemption mechanism to liquidate troves even if they're above the threshold as a stabilizing mechanism. It looks like a good set of mechanisms that is capable of maintaining a peg. I didn't know it had been running for 3 years, I'll have a look at price history to see if the peg has ever broken and see what happens to cause it to recover. I was under the impression that the oracle signal was on chain, from liquidity pools against other stables. All in all, in my mind, ability to hold a peg is less important than the feedback loops being in place to allow it to recover on it's own. It looks like liquity has those, unless im missing a glaring hole which I guess I'll find out in due time.

I knew Maker was not immutable yet, and I was eagerly awaiting the promised day when that would be rectified, this news of splitting maker out into a compliant, custodian asset collateralized system and a "pure decentralized" one tells me that basically that is never going to happen. I'll observe puredai. I have no interest in the other one.

All this stuff being on Ethereum is a bit of a minus for me too at this point. It works, I'm alright with it the way I'm alright with Bitcoin, but it isn't ideal.

[-] chaser@monero.town 2 points 5 months ago

see what happens to cause it to recover.

this should set you up as a starter: https://www.liquity.org/blog/on-price-stability-of-liquity

I was under the impression that the oracle signal was on chain, from liquidity pools against other stables

that would mean that if even one of those stables dies, LUSD would destabilize too (and there would be no possibility of intervention, since that protocol is completely ossified). that's worse overall.

Maker was not immutable yet

I was talking about Chronicle, the oracle protocol that spun off from Maker.

basically that is never going to happen.

look at Maker's history, what's been promised, and what's been delivered. don't take it for granted that puredai will ever happen.

[-] Scolding0513@sh.itjust.works 5 points 5 months ago* (last edited 5 months ago)

what's wrong with PureDAI? they wont allow other stables to be collateral, which is really good. Or will it also have a freeze authority like the other stable? idk that much so you need to provide some context bro.

anyway there is one on Solana that functions very similar to DAI, it's called PAI (Parrot). Also RAI o. ETH but it's not collateral based

[-] BD89@lemmy.sdf.org 5 points 5 months ago

https://forum.makerdao.com/t/reconciling-the-two-opposing-paths-for-decentralized-stablecoins/24280

It will become the next Terra Luna. They should make it new projects but they want MKR tied to its governance. Its all a cash grab and so sad. Thank you for the alternatives.

[-] Scolding0513@sh.itjust.works 3 points 5 months ago

I went through it, thanks

How exactly will this be the next Terra Luna? Maybe you can explain to me. Sorry It's been a while since I studied all that stuff and the crash happened.

But yeah, looks like they are essentially focusing all their attention on the new fed glowie coin, and pushing "PureDai" into a new DAO altogether, off to the sidelines. It will gain its peg in a fully automated form using decentralized collateral. Maybe that's the Terra Luna part you meant. But if it's overcollateralized then wont it be as strong as original DAI?

How sad. I agree with the last guy. This is sabatoge. Likely that the feds are pushing this in the background, pushing the Founder guy.

[-] goatmeal@monero.town 2 points 5 months ago

terra required too much manual intervention and also aimed to maintain a USD peg. RAI and pureDAI aren't supposed to be like that. so I wouldn't be so pessimistic. I think there is still a way to do it.

[-] trymeout@lemmy.world 3 points 5 months ago* (last edited 5 months ago)

I think stablecoins will always have a centralized point of failure. Weather it is an algorithm, or having the coin backed by the actual asset.

I think the best stablecoins are backed by the asset 1 to 1 or a little more then 1 to 1. Most stablecoins that do this are token on smart chain contracts which have another vulnerability which is being a smart contract. Smart contracts could contain a vulnerability and if it does have a vulnerability, a new contract will need to be made and users will have to switch their old token to the new tokens. Also censorship is an issue. https://cryptonews.com/news/tether-takes-action-blacklists-validator-address-linked-25-million-mev-bot-drain-heres-what-happened.htm

And these stablecoins are not private. The only private stablecoin platform out there is Haven but Haven assets are not backed 1 to 1.

I hope there are plently of stablecoins issued on Zano in the future. Zano allows you to create an asset without creating a smart contract. All assets on Zano are private. I would like to see Tether, USDC and other issue stablecoins on Zano. Trusting the issuers on backing the stablecoin and trusting the issuer to secure their private keys to prevent hackers from inflating the asset will be the only vulnerabilities, but you will have privacy and a censorship resistant stablecoin!

[-] Lemmchen@feddit.de 3 points 5 months ago

What's happening to DAI? I'm out of the loop.

[-] Rikj000@discuss.tchncs.de 2 points 5 months ago

Don't meddle with "stable-coins".
They are pointless since they:

Do not replace fiat
Are not stable since inflation on fiat
Are more risky then fiat

If you want a "stable-coin",
just use fiat..

Only crypto you should still care about these days is Monero.

[-] WishfulAlbatross@monero.town 2 points 5 months ago

DAI is unfreezeable and pseudonymous, digital fiat is not. It's a useful bridge.

[-] BD89@lemmy.sdf.org 1 points 5 months ago* (last edited 5 months ago)

Great idea! Any idea on how I would avoid getting brutally raped by the taxman by doing that? See, with DAI I could just convert it over and boom. That was it. My rent and car payment are locked in now for how ever many months worth I need it to be stabilized for. But with what you're suggesting why would I even use crypto at all just screw all the privacy and tax freeness of it all and convert it straight to cash with a CEX every time you want to stable up! That's terrible advice. I agree that Monero is so important but you're out of touch and mistaken if you think it can survive on its own. Haveno and Serai will be the only options left to get it soon other than mining or face to face p2p trading which isn't feasible for everyone. If we don't do something now that can introduce and immutable form of stability then we may end up losing the fight eventually.

[-] Anonymous@monero.town 2 points 5 months ago* (last edited 5 months ago)

A decentralized stablecoin needs to be fungible.

Haveno underscores how unusable non-fungible cryptocurrencies are in 2024. Maybe it didn't matter 10+ years ago when people didn't care about coin histories, but it does now. Even though Haveno supports XMR <-> other crypto pairings, you shouldn't buy them there because you risk getting coins considered "dirty" by the system, which are effectively worthless unless you can dump them on somebody else via p2p. What happens if you get your dai there, and then when the time comes to change it back, nobody on p2p will take it from you because of the risk. So you go to an instant swap or a CEX, and they freeze all of the dai you deposited, because of something up the chain that you can't see.

On every transaction, Trocador now says "Do not send funds that have been through a mixer to this exchange". Have coins you buy p2p been through a mixer? Quite possibly, and that's all it takes for them to be marked "dirty". Companies like Chainalysis now control the value and usability of all non-fungible crypto.

Trocador has a "taint" checker, but it's not free (up $2.2 per check), you'd have to check every p2p address before buying, you don't get the money back if you can't proceed with the trade, the information can't readily be shared with other people on the same dex, and you're funding the enemy every time you use it. And the controlling companies may deny access to that information to the general public or to dexes at any time.

Being able to use dai with xmr requires that in the future there still exist non-KYC exchanges which pay out "clean" dai and handle Monero. What if in the future they've all been pressured out of existence? As a nuclear option to cut them out of the system, all the non-fungible crypto they handle could be marked tainted simply for having been through a non-KYC exchange.

If dai uses USDC as collateral, it can be attacked by freezing the USDC it holds. Any decentralized stablecoin that uses non-fungible cryptos as collateral can be attacked by marking the crypto the smart contract or controlling DAO holds as "dirty". This is the scalability problem that Rune Christiansen is alluding to in his recent posts. Once there are too many people using it, there are multiple ways to shut down dai even if MakerDAO doesn't cooperate. It can be delisted from CEXes just like Monero.

The only way that an unfreezable stablecoin can function long term is if it's a fungible/privacy coin itself, and if it holds nothing but other fungible/privacy coins as collateral.

The two advantages you have versus something like Terra Luna is that the reserves can be verified to actually exist, via view keys, and that you don't have to worry about paying a yield.

[edit] The Trocador "marked dirty by chainalysis" check ought to produce a receipt page that can be shown to other people. I haven't tried it, so I don't know whether it does. Then, if you're buying non-fungible cryptos on Haveno, you should put in your terms of trade that the other party is responsible for putting all the crypo they want to trade on one address, checking it, providing a receipt page link, and not adding any more to that address before the trade goes through. Potentially, that way they can sell a lot of crypto to multiple people for only one $2.20 check... if the service remains available.

[-] tired_turtle@monero.town 1 points 5 months ago* (last edited 5 months ago)

This sucks especially since DAI is my favorite stablecoin for it being the only real decentralized stablecoin and now they're going to replace it with NewStable which will be upgraded with a freeze function wtf...I'm pissed...